Chevron corp

CHEVRON Corporation

I.C.G. IN BANCHE E ASSICURAZIONI

A cura di Paolo Lelio Galante e Rostyslav Lytvyn V.

01SUMMARY

HIGHLIGHTS

DEFENSIVE COMPANY

PROFITABILITY

DIVIDEND POLICY

STOCK PERFORMANCE

KEY INDICATORS

STOCHASTIC ANALYSIS

CORPORATE GOVERNANCE

STRATEGIC BUSINESS UNITS

INDUSTRY

KEY FACTORS

PORTERS’ 5 FORCES

ASSUMPTIONS3 STAGE DDMSENSITIVITY ANALYSISMONTE CARLO SIMULATIONRELATIVE VALUATIONPRICE TARGET

MAIN RISKS

FINANCIAL ANALYSIS

COMPANY OVERVIEW

VALUATION

INDUSTRY & COMPETITORS

RISK ANALYSIS

HIGHLIGHTS COMPANYOVERVIEW


FINANCIAL ANALYSIS

VALUATION RISK ANALYSIS CONCLUSION

CHEVRONCORPORATION

02HIGHLIGHTS

Market Profile

Last Price52W Low52W HighAvg. VolumesMarket CapDiv Yield 5Y AvBeta 52WEV/EBITDAP/EInstitutional Hold.Insider Holdings

BUY $ 130Recommendation: Taget Price:

23.93%UPSIDE

104.89100.86134.856,372,237$197.2 B3.2%1.096.70x11.5x59%0.030%

CHEVRONCORPORATION



FINANCIAL ANALYSIS


03HIGHLIGHTS

CHEVRONCORPORATION



FINANCIAL ANALYSIS


112.04Mean:100Number of Trajectories: 80Forecasted Days: 12.09Standard Deviation:STOCHASTIC ANALYSIS – Geometric Brownian Motion with GARCH

04CORPORATE GOVERNANCE

JOHN S. WATSONCHAIRMAN & CEO

At Company Since 1980

Insider Holdings 100,847

Options/Indirect Shares (as of 04-Mar-'15) 1,913,156

Institutional Ownership

59%

Top 10 Institutional Ownership

21%

Unknown41%

PATRICIA E. YARRINGTON VICE PRESIDENT & CFO

At Company Since 1980

Insider Holdings 16,471

Options/Indirect Shares (as of 04-Mar-'15) 709,870

TOTAL MEMBERS33 Management 21

Board 14

AVERAGE AGE58 YRS Management 55

Board 62

AVERAGE TENURE17 YRS Management 24

Board 10

INSIDER OWNED0.030% Management 0.017%

Board 0.023%

CHEVRONCORPORATION



FINANCIAL ANALYSIS


BOARD OF DIRECTORS

MANAGER

CHAIRMAN&

CEOQUALIFIED

ELECTION



FINANCIAL ANALYSIS


05CORPORATE GOVERNANCE

CHEVRONCORPORATION

06COMPANY OVERVIEWSTRATEGIC BUSINESS AREAS – Total Revenues By Business $173.4 B

UPSTREAMEXPLORATION AND PRODUCTION

DOWNSTREAMMANUFACTURING, PRODUCTS & TRASPORTATION

ALL OTHER TECHNOLOGY

Upstream27.9%

Downstream 71.3%



FINANCIAL ANALYSIS


27.9%

71.3%

0.8%

CHEVRONCORPORATION

07COMPANY OVERVIEW



FINANCIAL ANALYSIS


43%

10.50%

4.70%

3%

3.90%

2.90%

2.40%

2.20%

Stati Uniti

China

Japan

UK

Germany

France

Brazil

Italy

% of Tot. Rev. $173.4BSTRATEGIC BUSINESS AREAS – Total Revenues By Country

CHEVRONCORPORATION

08INDUSTRY & COMPETITORS

CHEVRONCORPORATION



FINANCIAL ANALYSIS


06/2014 07/2014 08/2014 09/2014 10/2014 11/2014 12/2014 01/2015 02/2015 03/2015 04/2015 05/2015

70.000000

75.000000

80.000000

85.000000

90.000000

95.000000

100.000000

105.000000

110.000000

115.000000BP- LON Price C VX- USA Price FP- PAR Price RDSB- LON Price XOM- USA Price Index Base [100]

BP CVX FP RDSB XOM

BP100.00% 75.04% 94.90% 66.48% 64.76%

CVX75.04% 100.00% 73.32% 95.09% 94.79%

FP94.90% 73.32% 100.00% 68.35% 62.91%

RDSB66.48% 95.09% 68.35% 100.00% 92.70%

XOM64.76% 94.79% 62.91% 92.70% 100.00%

COMPETITOR’S PRICE HISTORY AND CORRELATION MATRIX


CHEVRONCORPORATION



FINANCIAL ANALYSIS


CompanyName

Fiscal Period

UpstreamIncome FY1

DownstreamIncome FY1

RealizedPrice FY1

Exploration Expense

FY1

DividendYield

Price to Book

Value FY1

Price to Earnigs

FY1

EV / EBITDA

FY1

Return on Equity FY1

Return on Assets FY1

Chevron 03/2015 5741.88 4345.38 43.63 1708.50 3.75% 1.28x 26.00x 7.07x 4.9% 3.0%

Average 7745.41 4705.25 42.66 1872.05 5.54% 1.33x 19.55x 6.12x 7.1% 3.3%

Median 6276.95 5525.99 42.66 1687.00 5.74% 1.16x 18.20x 5.85x 7.1% 3.7%

BP 03/2015 5790.35 6382.10 -- 2373.50 6.04% 1.16x 18.20x 5.85x 6.4% 2.5%

ExxonMobil 03/2015 12388.78 4561.28 45.80 1523.50 2.92% 2.05x 20.44x 8.50x 10.0% 4.9%

Royal DutchShell B 03/2015 5995.99 6936.39 39.52 2563.66 5.31% 1.12x 15.92x 5.62x 7.1% 3.7%

Total 03/2015 8275.00 5525.99 -- 1687.00 5.74% 1.28x 14.92x 5.88x 8.6% 3.7%

Eni 03/2015 6276.95 120.50 -- 1212.58 7.72% 1.03x 28.25x 4.72x 3.6% 1.5%

INDUSTRY METRICS – KEY FACTORS


CHEVRONCORPORATION



FINANCIAL ANALYSIS


PORTER’S 5 FORCES

0

1

2

3

4

5

Threat of substituteproducts

Bargaining power ofcustomers

Bargaining power ofsuppliers

Threat of new entrants

Intensity of rivalry

-10%

0%

10%

20%

30%

40%

50%

60%

020000400006000080000

100000120000140000160000180000200000

Dec'90

Dec'92

Dec'94

Dec'96

Dec'98

Dec'00

Dec'02

Dec'04

Dec'06

Dec'08

Dec'10

Dec'12

Dec'14

Utili Trattenuti Crescita Utili Trattenuti

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

Dec

'82

Dec

'84

Dec

'86

Dec

'88

Dec

'90

Dec

'92

Dec

'94

Dec

'96

Dec

'98

Dec

'00

Dec

'02

Dec

'04

Dec

'06

Dec

'08

Dec

'10

Dec

'12

Dec

'14

Shareholders' Equity Cum. G of Tot Sharehold. Equity

FINANCIAL ANALYSIS : ‘Defensive Stock’CHEVRON

CORPORATION



FINANCIAL ANALYSIS


P/E adj P/BV adj Grahams’ Ratio DPS Mkt. Cap 10 YoY EPS g Current Ratio

9.13 x 1.36 x 12.41 x 100 Y $197,243 BN 61% 1.33 x

11

2014CURRENT RATIO 1.32QUICK RATIO 1.12DEB TOT./PN 17.94 %DEB./TOT. ATTIVO 10.46 %

Net Profit margin 10.03 10.12 11.76ATO 0.74 0.87 1.01Leverage 1.70 1.69 1.69ROE 12.6 14.9 20.1

FINANCIAL ANALYSIS : DuPont AnalysisCHEVRON

CORPORATION



FINANCIAL ANALYSIS


2014 2013 2012ROA 7.4 8.8 11.83LEVERAGE 1.70 1.69 1.69ROE 12.6 14.8 20.0

Tax Burden 61.67 59.67 56.50Interest Burden 1.63 1.31 1.32Ebit Margin 10.0 12.9 15.8ATO 0.74 0.87 1.01Leverage 1.70 1.69 1.69ROE 12.65 14.85 20.08

-15.9%ROA

-15.1% ROE

-0.09%NPM

-15% ROE

-14.9%ATO

-22%EBIT

margin

-15% ROE

-14.9%ATO

12

FINANCIAL ANALYSIS : MarginsCHEVRON

CORPORATION



FINANCIAL ANALYSIS


Date '04 Dec '05 Dec '06 Dec '07 Dec '08 Dec '09 Dec '10 Dec '11 Dec '12 Dec '13 Dec '14

Sales 142,897 184,922 195,341 203,970 255,112 159,387 189,705 236,541 222,629 211,772 191,755

Net Income 13,037 14,101 17,139 18,688 23,931 10,483 19,024 26,895 26,179 21,423 19,241

Gross Profit 42,846 38,107 43,696 43,698 52,223 28,778 59,064 50,827 44,176 36,479 28,038

CAPEX 6,007 8,701 13,813 16,678 19,666 19,843 19,612 26,500 30,938 37,985 35,407

Net Profit Margin 9.12% 7.63% 8.77% 9.16% 9.38% 6.58% 10.03% 11.37% 11.76% 10.12% 10.03%

Gross Margin 29.98% 20.61% 22.37% 21.42% 20.47% 18.06% 31.13% 21.49% 19.84% 17.23% 14.62%

CAPEX Ratio 46.08% 61.70% 80.59% 89.24% 82.18% 189.29% 103.09% 98.53% 118.18% 177.31% 184.02%

COMPETITIVE PROFIT MARGIN LOWER OIL PRICES EFFECT

0.00%

5.00%

10.00%

15.00%

-

50,000

100,000

150,000

200,000

250,000

300,000

4 5 6 7 8 9 10 11 12 13 14

Sales Net Income Net Profit Margin

0.00%

10.00%

20.00%

30.00%

40.00%

-

50,000

100,000

150,000

200,000

250,000

300,000

4 5 6 7 8 9 10 11 12 13 14

Sales Gross Profit Gross Margin

0.00%

50.00%

100.00%

150.00%

200.00%

-

10,000

20,000

30,000

40,000

4 5 6 7 8 9 10 11 12 13 14

Net Income CAPEX CAPEX Ratio

HIGH CAPITAL INTENSITY

13

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

-

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

Totale num azioni emesse Cash Dividends Paid Div Yield

-

10.00

20.00

30.00

40.00

50.00

60.00

-

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

EPS (recurring) DPS Payout Ratio

FINANCIAL ANALYSIS : Dividend PolicyCHEVRON

CORPORATION



FINANCIAL ANALYSIS


STRONG DIVIDEND TRACK RECORD

Data '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

EPS (recurring) 6.17 6.54 7.80 8.77 11.67 5.39 9.61 13.55 13.35 11.16 9.95

Totale num azioni emesse 2,107.12 2,232.69 2,164.56 2,090.43 2,004.23 2,007.72 2,007.48 1,981.17 1,946.70 1,913.60 1,879.65

DPS 1.53 1.75 2.01 2.26 2.53 2.66 2.84 3.09 3.51 3.90 4.21

Payout Ratio 24.92 26.76 25.77 25.77 21.68 50.76 29.96 22.99 26.35 35.17 41.52

Cash Dividends Paid 3,236.00 3,778.00 4,396.00 4,791.00 5,162.00 5,302.00 5,674.00 6,139.00 6,844.00 7,474.00 7,928.00

Repurchase of Common & Pref Stk. 1,663.00 2,737.00 4,491.00 6,389.00 6,821.00 - 306.00 3,193.00 4,142.00 4,494.00 4,412.00

Prezzo per azione a fine anno 37.13 46.35 61.97 82.23 65.55 72.02 88.12 105.59 106.45 124.23 112.18

Div Yield 4.12% 3.78% 3.24% 2.75% 3.86% 3.69% 3.22% 2.93% 3.30% 3.14% 3.75%

14

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

DPS DPS crescita

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

0

20

40

60

80

100

120

Dec'81

Dec'83

Dec'85

Dec'87

Dec'89

Dec'91

Dec'93

Dec'95

Dec'97

Dec'99

Dec'01

Dec'03

Dec'05

Dec'07

Dec'09

Dec'11

Dec'13

OIL nom OIL Adj inflaz DPS growth

CHEVRONCORPORATION

6.8% CAGR



FINANCIAL ANALYSIS


ASSUMPTIONS : Dividends’ Growth15

CHEVRONCORPORATION

-1

9

2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E



FINANCIAL ANALYSIS


ASSUMPTIONS : Dividends’ Growth

CAGR 6.8%

0% Growth

STABLE GROWTH

Rfr : Beta :

Mkt Risk Premium :Cost of Debt :

Tax :Perpetuity Growth :

2.21% 10-Y T const maturity rate1.21 Bloomberg on CVX6.25% 1928-2014 Avg Hist Premium3.191% Corp 10Y Bond 38.9% as of Q3 20141.37%

Ke :Payout for 1° g phase :

9.77% (CAPM)41.52%

Date 2015 E 2016 E 2017 E

EPS 10.14 10.14 10.14

DPS 4.21 4.21 4.21

PV 3.84 3.49 3.18

16

CHEVRONCORPORATION



FINANCIAL ANALYSIS


VALUATION : 3-Stage DDM

Date 2018 E 2019 E 2020 E 2021 E 2022 E

G rate 7.07% 5.99% 4.90% 3.82% 2.73%

Payout Ratio 51.02% 60.51% 70.01% 79.51% 89.00%

EPS 10.86 11.51 12.07 12.53 12.87

DPS 5.54 6.96 8.45 9.96 11.46

Beta 1.15 1.08 1.02 0.95 0.89

Ke 9.37% 8.97% 8.57% 8.17% 7.77%

PV 3.83 4.42 4.94 5.38 5.74

TRANSITION PERIODStable Phase g-rate 1.37%

Payout in St. Ph. 89.00%

Ke in Stable 7.73 %

FV 181.43

STABLE PHASE

PV Div in low phase 10.51

PV Div in trans ph. 24.31

PV TV 90.92

P0 125.74

VALUATION RESULT

17

CHEVRONCORPORATION



FINANCIAL ANALYSIS


VALUATION : Sensitivity18

Excess Ret % Δ Intrinsic Value $ Δ val GIUDIZIO Rendim Azionario

5.00% -20.00% 158.83 26.32% BUY 51.4%

5.25% -16.00% 151.1 20.17% BUY 44.1%

5.50% -12.00% 143.99 14.52% BUY 37.3%

5.75% -8.00% 137.43 9.30% BUY 31.0%

6.00% -4.00% 131.36 4.47% BUY 25.2%

6.25% 0.00% 125.74 0.00% BUY 19.9%

6.50% 14.34% 120.5 -4.16% BUY 14.9%

6.75% 15.22% 115.63 -8.04% HOLD 10.2%

7.00% 16.09% 111.08 -11.66% HOLD 5.9%

7.25% 16.96% 106.82 -15.04% HOLD 1.8%

7.50% 20.00% 102.82 -18.23% HOLD -2.0%

Rf % Δ Intrinsic Value $ Δ val GIUDIZIO E[Rendim Azionario]

1.00% -54.75% 159.36 26.74% BUY 51.9%

1.25% -43.44% 151.16 20.22% BUY 44.1%

1.50% -32.13% 143.7 14.29% BUY 37.0%

1.75% -20.81% 136.87 8.86% BUY 30.5%

2.00% -9.50% 130.61 3.88% BUY 24.5%

2.21% 0.00% 125.74 0.00% BUY 19.9%

2.50% 14.34% 119.52 -4.94% BUY 13.9%

2.75% 15.22% 114.58 -8.87% HOLD 9.2%

3.00% 16.09% 110 -12.51% HOLD 4.9%

3.25% 16.96% 105.74 -15.90% HOLD 0.8%

3.50% 58.37% 101.76 -19.07% HOLD -3.0%

CHEVRONCORPORATION



FINANCIAL ANALYSIS


VALUATION : MonteCarlo Simulation

Frequency

0

100

200

124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150

Simulation Statistics

Mean $ 136.37

Median $ 136.33

SD $ 2.60

5th Percentile $ 133.17

95th Percentile $ 139.82

Inputs to simulation : Dividends’ Growth rates (3 stages)

Cost of EquityPerpetuity Growth

18

1000 3-Stage DDM Models

RELATIVE VALUATIONCHEVRON

CORPORATION



FINANCIAL ANALYSIS


19

P/E Actual FY1 FY2 Mean EV/EBITDA Actual FY1 FY2

Chevron 11.50x 26.08x 16.76x 18.11x 6.73x 7.09x 5.83x

BP 44.68x 18.18x 14.38x 25.75x 5.76x 5.86x 5.13x

ExxonMobil 13.06x 20.58x 16.14x 16.59x 9.03x 8.56x 7.22x

Royal Dutch Shell B 13.31x 15.98x 12.20x 13.83x 5.79x 5.65x 4.62x

Total 33.52x 15.04x 12.55x 20.37x 6.13x 5.98x 5.14x

Eni SpA ADR 91.56x 28.20x 17.89x 45.88x 4.06x 4.73x 3.84x

Gazprom ADR 16.41x 3.55x 3.47x 7.81x 2.32x 2.73x 2.74x

Average 32.01x 18.23x 13.34x 21.19x 5.69x 5.80x 4.93x

Median 16.41x 18.18x 14.38x 16.32x 5.79x 5.86x 5.13x

Actual FY1 FY2

EPS 10.14 10.14 10.14 EBITDA 47,955.00

EPS*AVG P/E IND 324.58 184.85 135.28 EV from med fwd 1Y 280,817.82

EPS*MEDIAN P/E IND 166.40 184.35 145.81 Deb Netto 14,603.00

Minorities 1163.00

G = ROE(1-DIV. PAYOUT %) 7.40 Equity Value 265,051.82

Justified Forward P/E 17.50

# Azioni 1880.478

P P from EV/EBITDA

135.28 140.95

VALUATION : Price TargetCHEVRON

CORPORATION



FINANCIAL ANALYSIS


DDM a 3 Stadi

EV/EBITDAP/E

TP

21

$ 135.28 $ 140.95

$125.74 70%$136.37 30%

50 %

25 % 25 %

$ 130MONTE CARLO

LIKELIHOOD1 2 3 4

IMPA

CT

23

4

Sviluppo deigiacimenti, Concessioni

e licenze

Volatilità nelprezzo dellecommodity

Eventualitàstraordinarie

legate all’operatività

1

RISK ANALYSISCHEVRON

CORPORATION

22



FINANCIAL ANALYSIS


Fattori umanie naturali, fuoridal controllo di

Chevron

Stime del Management

Assenza dicoperture

assicurative

CONCLUSIONSCHEVRON

CORPORATION



FINANCIAL ANALYSIS


MERITS CONCERNS

• Struttura Operativa Diversificata• Nuovi progetti, riduzione del

CAPEX e costi fissi assicurano la crescita dei dividendi

• Solida situazione patrimoniale e finanziaria

• Esperienza del Management

• Elevata incertezza sull’andamentodei prezzi del greggio

• Incertezza sui tassi d’interesse• Flussi di cassa deboli• Eccessiva Intensità di Capitale

CURRENT PRICE TARGET PRICE UPSIDE

BUY

104.89

23

130 23.93 %

24QUESTIONS & ANSWERS

&NON ABBIATE PIETA’!



FINANCIAL ANALYSIS


CHEVRONCORPORATION



FINANCIAL ANALYSIS


Appendice

0 0 0 0 0 0 0 0 0 0 0 213

56

99

157

193182

137

83

40

2112 5 0 0 0 0 0 0 0 0 0 0

0

50

100

150

200

250

Frequenze SimulateAssunzioni Pre-Simulazione

SD 5.15% (sd storicadella crescita dei

dividendi)

g μ + σ*Z

μDiviendo stimato

con il nostroDDM

CHEVRONCORPORATION



FINANCIAL ANALYSIS


Appendice

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GAUSSIAN MonteCarlo 1000 Simulations Distrib

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Appendice

APPENDICE

Appendice

APPENDICE

Appendice

APPENDICE

Appendice

APPENDICE

Economy & Finance

Chevron corp